Top Copper Producer Freeport Reinstates Dividend

Top copper producer Freeport-McMoRan (NYSE:FCX) has reinstated its cash dividend after three years on the back of a stronger market forecast.

The Arizona-based miner declared a quarterly dividend of 5 cents a share on Tuesday (February 6). An improved balance sheet, stronger market conditions and a positive outlook for cashflow generation are the main reasons behind the move, the company said.

“We expect to continue to strengthen our balance sheet, maintain a disciplined approach to investing in attractive growth projects as economic conditions warrant and provide cash returns to shareholders,” Chief Executive Richard Adkerson said in a statement.

At 5 cents per quarter, the annual amount would equal 20 cents, the same amount the company paid shareholders before suspending its dividend in December 2015 due to weak market conditions.

One of Freeport’s key operations is Grasberg, the world’s second-largest copper mine, which produced 1 billion pounds of copper in 2017. The company is still in talks with Indonesia over a permit for the mine; a deal is expected to be reached in the first half of 2018.

Last year, disruptions at Grasberg due to a smelter strike and issues surrounding the renewal of Freeport’s mining permit fueled fears of copper supply shortages in the market.

“We’re focused on getting this Indonesian thing resolved and recognize that until we do, that’s going to be a factor for credit ratings, stock valuation,” Adkerson said.

In January, Freeport reported better-than-expected quarterly earnings supported by higher copper prices and productivity gains. Copper prices have been on an uptrend since last year, increasing more than 24 percent year-on-year.

“During 2017, our global team’s focus on productivity and cost and capital discipline, together with improved market conditions for copper, produced solid results,” Adkerson explained.

Aside from Grasberg, Freeport also operates two other top copper mines: Cerro Verde in Peru and Morenci in the US.

On Wednesday (February 7), shares of Freeport closed down 4.22 percent, trading at US$17.92 in New York. The company’s share price has lost 5.33 percent since the start of the year. Meanwhile, LME copper closed down 2.8 percent, at $6,880 per tonne, due to market volatility.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.